Unless otherwise noted, the opinions of the author provided are not necessarily those of State Street. Views and opinions are subject to change at any time based on market and other conditions.
The policy climate is favorable toward this investment approach.
New policy limits and active discussions by Congress and regulators characterize policy sentiment as both engaged and charged over these policy approaches.
The policy position is abundantly cautious toward this investment approach.
Definition Retirement income is the money a person receives in retirement; sources include social security benefits, annuity proceeds, pensions, or IRAs. Here, the retirement income policy focus is on the annuitization of defined contribution (DC) assets.
Policy Status A 2008 Safe Harbor adopted by the DOL detailed a series of steps for a fiduciary to take in selecting an annuity provider. A provision of the SECURE ACT enhanced these protections by deeming a fiduciary to have met the conditions of the Safe Harbor if it obtains certain written representations from the insurer regarding the insurer’s licensing requirements and standing under state law.
What to Watch SECURE 2.0 would increase accessibility of certain annuity options such as QLACs by raising/removing allocation limits.
Definition Environmental, social, and governance (ESG) criteria are a set of standards that can be used, in addition to financial performance data, to evaluate potential investments.
Policy Status The Biden DOL proposal on ESG factors, including climate change and diversity, equity, and inclusion, would allow plans to consider ESG the same as any other investment factors.
What to Watch While the Biden DOL proposal may make some more comfortable with ESG in DC plans, there is some concern or hesitation that future Republican administrations will seek to roll these efforts back.
Definition Private equity is an alternative investment class and consists of capital that is not listed on a public exchange. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.
Policy Status The Biden DOL’s clarification of private equity puts guardrails around how such investments can be included in DC plans.
What to Watch The Biden DOL’s clarification was in response to a Trump Administration DOL Information Letter. As such, it’s possible that a future Republican administration would change this stance and/or the Jobs Act would change permissibility.
Definition Cryptocurrency is a digital currency secured by cryptography, making it difficult to counterfeit or double-spend. Cryptocurrency is not generally issued by a central authority, making it theoretically immune to government interference or manipulation.
Policy Status The Biden DOL guidance cautions DC plans about the use of crypto investments, either directly or indirectly (through brokerage windows).
What to Watch Fidelity announced the ability to add crypto to plans recordkept with them. The DOL’s initial response to Fidelity’s announcement should act as a warning to clients who might consider including crypto in their 401(k) plans.
Investing involves risk including the risk of loss of principal.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio's specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio's ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
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The views expressed in this material are the views of Melissa Kahn through the period ended June 1, 2022, and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
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